Anyone Want Additional Payment Limitations in the Next Farm Bill?

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It’s a given: Payment limits will come up anytime a discussion about a farm bill breaks out between farmers and politicians.

The recent U.S. House Agriculture Committee farm bill field hearing in Lubbock, TX, carried on the tradition. Commodity association spokesmen acknowledged that funding for the next farm bill likely will be even less than they had in the 2008 legislation. But they also contend that they’ve been cut enough and that U.S. taxpayers receive a good value for the money invested in farm programs.

“Less than one quarter of 1% of the federal budget and less than 17% of the USDA budget is dedicated to the farm safety net,” says El Campo, TX, rice producer L.G. Raun. “We are deeply concerned about the deteriorating budget baseline for agriculture.”

Raun reminded the eight member of the House Agriculture Committee on hand for the hearing that the safety net had been weakened by both the 2005 budget reconciliation and again in the 2008 Farm Bill.

“The success of farm legislation has always depended on carefully balanced legislation and coalition building,” Raun says. “We are deeply concerned that singling out the farm safety net for additional cuts may upset this fragile balance.”

Brad Heffington, a diversified farmer from Lamb County, TX, says eligibility changes in the 2008 law made programs more restrictive. “The adjusted gross income test was substantially tightened. Unfortunately, in addition to the legislative changes authorized by Congress, we believe USDA over-stepped Congressional intent when implementing several key payment eligibility provisions by issuing regulations that are overly complicated and made changes to program eligibility provisions that were not specifically directed by the 2008 Farm Bill.”

He also points out that restrictions against farm corporations are unfair. “Under the new direct attribution rules, there is no reason that a corporation should be treated any differently than other business structures. By limiting corporations, comprised of eligible program participants, Congress has unfairly penalized operations that utilize a corporate business structure for legitimate business or estate planning purposes.”

He says by limiting a corporation to a single pay restriction, many family farming operations may be less able to use a business structure to bring in family members or new farmers through a direct ownership interest. He says a corporate structure also may provide for an orderly transition of a farm operation from one generation to another.

“We believe this situation also prevents the direct attribution rule from working as intended to ensure that every qualified farm program participant receives no more, and equally important, no less than they are eligible to receive under the law.

“We continue to oppose payment limitations and imposition of further restrictions,” he says.

“In order for a farm program to be effective, it needs maximum participation without regard to farm size or income,” says Doyle Schniers, a cotton farmer from San Angelo, TX. “The changes in the 2008 Farm Bill significantly reduced payment limitations and the adjusted gross income (AGI) test was tightened. Any additional changes will begin to erode the effectiveness of the program and commercial-size operations will not be able to participate fully.”

Dee Vaughan, a Dumas, TX, corn producer, says payment limitation efforts can’t be a “one size fits all” proposition that does not account for differences in production expenses, weather risks from one region to another and the opportunity to participate in off-farm income.

“The rule limiting corporations to one payment limit should be removed,” Vaughan says. “The payment limitations should not be reduced further.”

He says corporations offer many advantages in many businesses situations. “It may be the easiest structure by which beginning farmers can be added. If two or more individuals can form a general partnership and receive payments directly attributed to their social security numbers, then why can the same individuals not form a corporation and have the same right?”

He says rules that prevent an existing farmer from co-signing financing for a beginning farmer should be reviewed and modified to help anyone wanting to enter production agriculture.

The Texas Wheat Producers Association (TWPA) also opposes additional farm program payment limitations. “With regard to the adjusted gross income eligibility tests for producers to receive payments, farmers today – whether on a small or large operation – can easily accrue expenditures that far outweigh their gross income,” says David Cleavinger, speaking for the TWPA.

He says the costs of fuel and fertilizer can be “extremely volatile and the cost of equipment can seem outlandish to someone unfamiliar with the capital intensive nature of modern farming. We may see significant increases in seed costs in the near future as there continues to be progress in developing commercially viable biotech wheat products.”

He says TWPA recommends maintaining the current AGI level for non-farm income at $500,000 and on-farm income at $750,000 rather than looking at a 25% cut.

“Maintaining a strong farm safety net is one key to (providing an abundant and safe source of food and fiber),” says cotton and grain producer Dan Smith, Plainview, TX. He says the focus – instead of rural development – should be on “farmer development. It is the farmer who truly brings money into the rural economy, supports local businesses and educates our youth. Off-farm jobs do not keep my local school district’s tax base healthy. The school district is heavily dependent on property taxes, which are driven by land values, which are driven by farm economies.”

Jimbo Grissom, a Gaines County, TX, peanut and cotton farmer, says the committee should “avoid further changes in eligibility standards,” for program payments. “We are still trying to adjust to the significant changes in this area from the 2008 Farm Bill. Constantly moving the markers on eligibility makes it very difficult for full-time farmers who are under pressure to grow their operations to make a decent living as costs drive down per acre profit possibilities.”

He says major changes have been made and that farmers now need stability.